Water
2.6 OVERVIEW OF BUDGET FUNDING 2
2.6.6 LEVELS OF RATES, SERVICE CHARGES AND OTHER FEES AND CHARGES
The City’s revenue quantum is determined by setting a package of tariffs which are not only affordable to the rate payers and the users of its services but deemed to be at fair and realistic levels when viewed in context of its programmes to assist those who do not have the means to pay. To maintain an effective, efficient and well-run city, tariff increases are inevitable.
Tariff-setting plays a major role in ensuring desired levels of revenue by assisting in the compilation of a credible and balanced budget to accommodate the acceleration of basic services. The setting of tariffs for the 2015/16 financial year continues to be guided by a tariff policy, which provides a framework within which the eThekwini municipality can implement fair, transparent and affordable charges for the provision of services.
The tariff level setting process was largely influenced by the considerable increase on bulk electricity purchases and the disproportionate increase above CPI levels. This has distorted the city’s average tariff and charges increases. The adverse impact of the current economic climate coupled with unfavourable external financial pressures on services makes tariff increases higher that CPI levels inevitable. In determining the increase in rates tariffs and other charges these are reflective of the appropriate balance between the interest of poor households, other customers and also ensuring the financial sustainability of the municipality.
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The following principles and guidelines have been considered in the draft 2015/16 MTREF:
· Realistic revenue estimates through a conservative, objective and analytical process.
· Identification and pursuance of grants from national, provincial and other agencies.
· The impact of inflation and other cost drivers.
· Credible collection rates.
· The impact of cross subsidisation
· The ability of the community to pay for services rendered.
· Local economic conditions.
As in the past, the above principles dictate the annual increase in the tariffs charged to the consumers and the ratepayers.
RATES
Property tax represents the second most substantial tax revenue for the municipality. It is a well founded tax with a long and sustained history. This source of revenue is a relative stable source as it is not substantially affected by economic cycles, as is the case with other tariffs. Property rates cover the cost of the provision of general services.
Determining the effective property rate tariff is therefore an integral part of the municipality’s budgeting process.
The municipality is currently levying rates on The General Valuation Roll 2012 and relative supplementary valuation rolls. The implementation date for the General Valuation Roll 2012 was 1 July 2012. The levying of rates in terms of the Municipal Property Rates Act whereby properties are valued based on market value as at the date of valuation, is being applied for this Medium Term Budget.
The diminishing of property rates on vacant land due to social housing projects together with the decreasing middle class population due to less job opportunities are some of the risks identified to the rates base. The city’s response to these risks include integration of communities with more middle class housing than social housing together with job creation strategies to capacitate consumers to be able to pay. A 1% growth in the rate base is anticipated mainly due to new developments.
MPRA AMENDMENTS: IMPACTS
The Valuation Roll will have to be amended on the property register side in order to extract certain information to be able to accurately model the impact and the transition implementation plan. COGTA has promulgated regulations which prescribe a reduced ratio for Public Benefit Organisations during 2010. The Municipality did not implement the ratio because, whereas previously Council could decide on the category of properties, it is now mandatory to have a category of property “Public Benefit Organisation”. This change will now require that the City adjust its rate randage to reflect the ratio change. COGTA has however indicated during a meeting subsequent to the promulgation of the amendments that they will look at the following criteria to identify eligible public Benefit Organisations
For a private School
· it has to be registered with the relevant department of education; and
· For the previous financial year proof that it has received a subsidy from the department
All the other PBO’s listed in the legislation has to proof that they received more than 51% of their income from government grants and or National Lottery funds. It is anticipated that all property falling in the “Public Service Property” will also receive a ratio of 1:.25 of the Residential rate randage. This assumption is based on a previous regulation in 2009 that was withdrawn when all “State Owned Property” was allowed a ratio of 1:25 of the Residential rate randage. A calculation was done on the current rate randage to ascertain the impact of the above and it is anticipated that the shift in incidence over the categories of property will result in an estimated increase of 7,2%.
VALUATION ROLL
In compliance with the Municipal Property Rates Act, the municipality has released its second general valuation roll, GV 2012 on 2012-02-10. A valuation date of 1 July 2011 has been determined, with implementation of the valuation roll being with effect from 1 July 2012. The valuation roll was open for inspection to the public until the end of March 2012 during which time owners could lodge an objection against any entry in the valuation roll.
Approximately 10 600 objections were received (compared to 50 000 in 2008 i.e. less than 1.5%) with the review of objections still underway. As at 01 November 2013, EThekwini Municipality had implemented the fifth supplementary valuation roll for GV 2012. There were 6 000 entries in this supplementary valuation roll and approximately 61 objections were received.
ELECTRICITY AND WATER
The increase in water and electricity tariffs is consistent with National Policy on the provision of free basic services, Council’s Indigent relief measures and tariff policies. The tariff increases are necessary due to the increase in the cost of bulk purchases, maintenance of existing infrastructure, new infrastructure provision and to ensure the financial sustainability of the services. In the review of the tariffs for water and electricity , the municipality ensures that the level of tariffs are cost – reflective including the cost of maintenance and renewal of networks and the cost associated with reticulation expansion and that the associated structure of the tariffs encourage efficient and sustainable consumption.
REFUSE REMOVAL
The increase in the domestic refuse removal tariff for the 2015/16 year is mainly due to salary increases, conversion of agency staff to permanent and the increased cost of the purchase of refuse bags.
SEWERAGE
With effect from the 2011/12 year, a volume based sewage disposal charge system was introduced based on the percentage of water consumption. A flat tariff is charged to Non-Domestic Consumers and a stepped tariff to Domestic Consumers in line with the consumption bands for water. The progressive nature of the existing domestic stepped tariff structure for the both water and sanitation allows for the needs of the indigent. It is also designed to discourage high water consumption levels which have an impact in on the size of both the water and sanitation portions of a consumer’s bill. It enables all consumers to adjust their consumption level to ensure availability.
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